what is the difference between MRS(marginal rate of transformation), MRS(marginal rate of substitution), MOC(marginal opportunity cost)?
MARGINAL OPPURTUNITY COSTrefers to the satisfaction of ones want at the expense of another want while marginal cost is the addition to total cost as a result of increasing output by one unit.
MARGINAL RATE OF SUBSTITUTION is the slope of the indifference curve. It is the rate at which the consumer is willing to give up certain units of a good in order to get an additional unit of another good. it is equal to the ration of the Marginal Utilities of the 2 goods.MARGINAL RATE OF TRANSFORMATION is the slope of the production possibiltiy frontier. it is the rate at which the producer is willing to give up the production of certain units of a good in order to increase the prpduction of the other good by 1 unit ( by shifting the inputs more towards the production of the last good). it is equal to the ratio of the marginal costs of the 2 goods.
1. MRS is the slope of IC
1 MRT is the slope of PPC .
2.It is the rate at which a consumer is willing to substitute one good for each additional unit of the other good.
2. It shows that for the production of every additional unit of one good, more and more units of other good has to be sacrificed
3. As we move along the IC ,value of MRS keeps on decreasing.
3. As we move along the PPC, the value of MRT Keeps on increasing.